(The following statement was released by the rating agency) Fitch Ratings-Sydney-February 06: Fitch Ratings has confirmed that the issuance of AUD300.0 million class A3-R floating-rate notes to fund the repayment of AUD300.0 million fixed-rate soft-bullet class A3 notes will not result in a downgrade or withdrawal of any of the ratings of Medallion Trust Series 2014-1. The transaction has had strong performance since closing and all ratings were affirmed on 15 November 2018. The ratings are as follows (note balances as at January 2019 payment date): AUD167.7 million Class A1 notes: 'AAAsf'; Outlook Stable AUD167.8 million Class A2 notes: 'AAAsf'; Outlook Stable AUD300.0 million Class A3 notes: 'AAAsf'; Outlook Stable AUD0.0 Class A3-R notes: 'AAAsf'; Outlook Stable AUD74.5 million Class B notes: 'AAAsf'; Outlook Stable The issuance of AUD300.0 million class A3-R notes will be used to repay the outstanding class A3 notes (as the balance of the GIC account is zero) on the A3 refinancing date, which is the February 2019 payment date. The class A3-R notes will be issued by Perpetual Trustee Company Limited in its capacity as trustee for Medallion Trust Series 2014-1. The transaction is a securitisation of Australian conforming residential mortgages originated by Commonwealth Bank of Australia (CBA, AA-/Negative/F1+). KEY RATING DRIVERS Operational Risk: CBA has extensive experience originating, servicing and managing its mortgage portfolio, mitigating the transaction's operational risk. CBA's collection timelines, policies, procedures and origination practices are largely in line with those of other major Australian banks, as evident from the historical performance of Medallion transactions. Asset Analysis: The asset model was not re-run in accordance with Fitch's criteria, as all rated notes are rated at the highest possible level, asset composition and performance have not deteriorated materially and there have been no material changes to asset assumptions since the last asset-model analysis. Liability Analysis: Cash flow analysis was not performed for any of the transactions, as all rated notes are rated at the highest possible level, cash flow distributions have been within expectations and there have been no material changes to cash flow assumptions since the cash flow model analysis at closing. Step-down conditions have been met for this transaction. The class A3-R notes benefit from credit enhancement (CE) provided by the subordinate class B and C notes. The notes have built CE to 16.4% since closing, from 8.0%. The most junior notes - class C - receive no principal allocation until all other notes are repaid in full, which continues to build CE for all rated notes and mitigates any concentration in the tail-end of the transaction.
Macroeconomic Factors: Fitch expects stable mortgage performance, supported by sustained economic expansion in Australia. The economic outlook is driven by steady forecast GDP growth of 2.7% and one 25bp cash rate increase in 2019. RATING SENSITIVITIES Fitch does not expect the ratings to be affected by any foreseeable change in performance. The prospect of downgrade is remote, given the level of subordination available to all rated notes, pool performance and adequate excess spread. The ratings are independent of downgrades to the lenders' mortgage insurance provider ratings. Fitch's initial rating drivers and rating sensitivities are discussed in the new issue report, Medallion Trust Series 2014-1, dated 11 February 2014, and available at www.fitchratings.com. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action. DATA ADEQUACY Prior to the transactions' closing, Fitch reviewed the results of a third-party assessment conducted on the initial asset portfolio information for all transactions and concluded that there were no findings that affected the rating analysis. Fitch has not reviewed the results of any third-party assessment of the asset portfolio as part of its ongoing monitoring. As part of its ongoing monitoring, Fitch reviewed a small targeted sample of CBA's origination files and found the information contained in the reviewed files to be adequately consistent with the originator's policies and practices and the other information provided to the agency about the asset portfolio. Overall, Fitch's assessment of the asset pool information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis: Expected yield analysis details provided by CBA on 9 January 2019 Transaction reporting data as at January 2019 payment date provided by CBA The issuer has informed Fitch that not all relevant underlying information used in the analysis of the rated notes is public. Contacts: Lead Surveillance Analyst Eugene Wang Analyst +61 2 8256 0373
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